Delay forecast for banks’ capital hike plans

Wednesday, Mar 18, 2020 07:09

Banks are under great pressure to hike capital to satisfy Basel II standards.— Photo Vietcombank

The Government’s plans to increase capital for large State-owned commercial banks in the first quarter of this year could be delayed due to the Covid-19 outbreak, analysts predicted.

The pandemic would also cause adverse impacts not only on business performance of listed firms but also the Government’s divestment plans from State-owned enterprises (SOEs), according to KB Securities Company (KBSV) analysts.

According to the Government’s roadmap, it would increase charter capital by VND10 trillion (US$429 million) for Vietcombank and Vietinbank in the first quarter of this year.

As for Agribank, all its profit in 2020 will be used to increase capital instead of contributing to the State budget.

The State Bank of Viet Nam (SBV), on behalf of the State, currently holds 74.8 per cent of capital in Vietcombank and 64.46 per cent in Vietinbank.

Meanwhile, fully State-owned lender Agribank is preparing to launch its IPO in the near future.

If failing to get the funding in this quarter, the three banks could not meet Basel II standards this year as required by the SBV as well as be qualified to expand credit to support the country’s economic growth.

The banks are under great pressure to hike capital to satisfy Basel II standards, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision.

Under the SBV’s regulations, banks must maintain a capital adequacy ratio (CAR) of at least 8 per cent as per Basel II norms starting in 2020. The CAR of State-owned banks will fail to reach the minimum level set by the SBV if they fail to increase capital.

Raising capital has been a struggle for Vietnamese banks in recent years. For example, Vietinbank – the fourth largest listed bank – has seen its capital remain unchanged since 2014 at VND37.23 trillion. — VNS

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